Lam Research Corp (LRCX)
Activity ratios
Short-term
Turnover ratios
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | |
|---|---|---|---|---|---|
| Inventory turnover | 2.17 | 2.27 | 2.67 | 3.33 | 3.36 |
| Receivables turnover | 5.91 | 6.10 | 3.95 | 4.76 | 4.70 |
| Payables turnover | 14.89 | 23.26 | 10.46 | 10.80 | 10.78 |
| Working capital turnover | 1.74 | 1.91 | 2.21 | 1.77 | 1.28 |
Inventory turnover measures how efficiently a company manages its inventory. Lam Research Corp's inventory turnover has decreased over the last five years, indicating that it takes longer for the company to sell its inventory. This could suggest potential issues with inventory management or slowing sales.
Receivables turnover reflects how quickly a company collects outstanding receivables. Lam Research Corp's receivables turnover has been relatively consistent over the years, indicating that the company has been efficient in collecting payments from customers.
Payables turnover measures how quickly a company pays its suppliers. Lam Research Corp's payables turnover has varied over the years, with a significant decrease in 2023 followed by a gradual increase. A lower payables turnover can indicate stricter payment terms with suppliers or potential cash flow challenges.
Working capital turnover shows how efficiently a company generates sales using its working capital. Lam Research Corp's working capital turnover has fluctuated over the years, with a peak in 2022 and a decrease in 2023. A higher working capital turnover generally indicates better utilization of resources to generate revenue.
Overall, Lam Research Corp's activity ratios suggest mixed performance in managing its inventory, receivables, payables, and working capital. Further analysis of the underlying factors affecting these ratios would provide more insights into the company's operational efficiency and financial health.
Average number of days
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 168.40 | 160.58 | 136.90 | 109.58 | 108.58 |
| Days of sales outstanding (DSO) | days | 61.71 | 59.79 | 92.39 | 76.66 | 77.60 |
| Number of days of payables | days | 24.51 | 15.69 | 34.90 | 33.81 | 33.85 |
Activity ratios provide insights into how efficiently a company manages its assets and operations. Let's analyze the activity ratios of Lam Research Corp based on the provided data:
1. Days of Inventory on Hand (DOH):
- The DOH measures how many days a company takes to sell its inventory.
- Lam Research's DOH has shown an increasing trend over the years, indicating that inventory turnover has been slowing down.
- The company had 168.40 days of inventory on hand in 2024, compared to 108.58 days in 2020.
- A high DOH could suggest oversupply, obsolete inventory, or inefficiencies in production and sales processes that need to be addressed.
2. Days of Sales Outstanding (DSO):
- The DSO metric reflects the average number of days it takes for a company to collect payment after a sale.
- Lam Research's DSO has shown some variability over the years but has trended downwards overall.
- In 2024, the company had 61.71 days of sales outstanding, indicating an improvement from 77.60 days in 2020.
- A lower DSO suggests that the company is collecting payments more quickly, which could improve cash flow and liquidity.
3. Number of Days of Payables:
- This ratio indicates the average number of days it takes a company to pay its suppliers.
- Lam Research's number of days of payables has fluctuated but has generally been increasing.
- In 2024, the company had 24.51 days of payables, up from 33.85 days in 2020.
- A longer payment period could indicate a strategic use of trade credit to manage cash flow or negotiate favorable payment terms with suppliers.
Overall, analyzing these activity ratios for Lam Research Corp shows areas where the company may need to focus on improving efficiency, such as managing inventory levels, accelerating collections, and optimizing payment terms with suppliers to enhance operational performance and financial health.
See also:
Lam Research Corp Short-term (Operating) Activity Ratios
Long-term
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | |
|---|---|---|---|---|---|
| Fixed asset turnover | 7.00 | 9.56 | 10.61 | 11.44 | 9.37 |
| Total asset turnover | 0.79 | 0.92 | 0.99 | 0.91 | 0.68 |
The fixed asset turnover ratio measures how efficiently a company generates sales revenue from its fixed assets. In the case of Lam Research Corp, the trend in the fixed asset turnover ratio has been fluctuating over the past five years. The ratio decreased from 9.37 in 2020 to 7.00 in 2024, indicating a decline in the efficiency of generating sales from fixed assets.
On the other hand, the total asset turnover ratio represents the company's ability to generate sales from all its assets. Lam Research Corp's total asset turnover ratio has also shown variability during the same period, with a peak of 0.99 in 2022 and a low of 0.68 in 2020. Despite the fluctuations, the company's total asset turnover ratio has not shown a consistent upward or downward trend.
Overall, the analysis of Lam Research Corp's long-term activity ratios suggests that the company's efficiency in generating sales from both fixed assets and total assets has experienced fluctuations over the past five years. Further investigation into the underlying factors driving these fluctuations would be necessary to assess the company's long-term operational performance.